5 Contracts Clauses for Leaving Nothing to Luck

Protecting your business from potential risk is not always easy. Unless you have a crystal ball, it’s impossible to predict what might go wrong.

The trick, of course, is being prepared for anything that could put your company and the livelihoods of you and your team in jeopardy. Especially, when it comes to situations where other people have a lot on the line, too, like your customers, partners, vendors, etc.

This means that if your business uses its own contracts (as opposed to signing the other guy’s), you need to go all out to protect yourself.

It has nothing to do with the amount of trust and faith you have in those you do business with, it’s simply about being smart – just in case.

Here are five clauses you absolutely must include in your company’s boilerplate contracts so as not to leave your future to luck:

  • Interest and Attorney’s Fees: There must be a penalty associated with a failure to render proper payment.
  • Jurisdiction: If you do business with customers in other states, a provision ensuring that you can bring suit in your own back yard – state and county – is a MUST.
  • Limitation on Liability: Your liability should be limited to, at most, what the client has already paid you. Consequential damages, lost profit claims, etc. should be expressly excluded.
  • Warranty exclusion: There are certain so-called “magic words” that you have to use in your contracts to exclude implied warranties. Do you use them?
  • Notification: Provide for a mandatory notification of claims against your company within a certain (brief, but reasonable) period of time. You will be able to prevent the vast majority of claims against your company, just because many customers (especially those who fail to pay and are using a newly-minted complaint as an excuse) fail to meet this deadline.

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Eliot Wagonheim shares business insights that help companies stay on course. Get our latest blog posts sent right to your inbox. Subscribe using the sign up form to the left of this post.

This entry was posted on Friday, March 21st, 2014 at 3:57 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.